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‘This would help us to address the EU’s concern that our withdrawal blows a hole in their budget, we would be honouring commitments that we have made for the rest of the EU’s budgetary period, and then the EU would need to justify why we must contribute more than this.’

Chancellor Philip Hammond said this week that the transitional period while Britain exits the EU would look ‘a lot like the status quo’.

Senior Tories hope the timing of the speech, a week before the start of the Conservative conference, will prevent Brexit overshadowing the annual gathering of the Tory faithful in Manchester.

But the main aim of the speech is to try to break the impasse in the negotiations with Brussels.

Chancellor Philip Hammond said this week that the transitional period while Britain exits the EU would look ‘a lot like the status quo’

Ministers want to open talks on a new trade deal with Europe next month.

But the EU’s chief negotiator Michel Barnier warned this month that ‘sufficient progress’ on key areas, including the divorce bill, had not yet been made. Former European Council president Herman van Rompuy said last week that the chances of moving to the second phase of negotiations next month were ‘in the neighbourhood of zero’.

Mrs May will use her speech to point to progress on key issues such as the rights of EU citizens and the vexed question of the Irish border. But she will warn it is essential for both the UK and the EU to press ahead with trade talks in order to ensure a smooth exit.

The fourth round of formal talks, which was due to begin on Monday, has been delayed for a week, with many in the EU believing Mrs May is planning to use her speech to make a new offer to Brussels.

Downing Street declined to discuss the content of Mrs May’s speech, saying only that she will give an ‘update on Brexit negotiations so far’ and will ‘underline the Government’s wish for a deep and special partnership with the European Union once the UK leaves the EU’.

Explaining her choice of venue, the PM’s spokesman said: ‘The PM wanted to give a speech on the UK’s future relationship with Europe in its historical heart. The UK has had deep cultural and economic ties spanning centuries with Florence, a city known for its historical trading power.

‘As the UK leaves the EU we will retain those close ties. As the Prime Minister has said many times, we are leaving the EU, not Europe.’

Meanwhile, Mr Hammond last night insisted that Britain would not accept any effort to Brussels to use Brexit to sideline the City.

The Chancellor said he accepted the European Union had legitimate concerns about the supervision of financial markets in London which provide services across the continent.

But he warned that those concerns must not be used as a smokescreen to support EU financial centres at the expense of the UK.

‘Let me be clear, we will not accept protectionist agendas, disguised as arguments about financial stability,’ he told an audience in the City.